Friday

Goldman Sachs Sued by SEC

Post a Comment April 16, 2010 – 4:37 pm |   | Permalink |  Print This Post |

From Yahoo Finance:

WASHINGTON (AP) — The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering.

The Securities and Exchange Commission announced Friday civil fraud charges against the Wall Street powerhouse and one of its vice presidents. The agency alleges Goldman failed to disclose that one of its clients helped create — and then bet against — subprime mortgage securities that Goldman sold to investors.

Investors in the mortgage securities are alleged to have lost more than $1 billion, the SEC noted. The agency is seeking to recoup profits reaped on the deal.

The Goldman client implicated in the fraud is one of the world’s largest hedge funds, Paulson & Co., which paid Goldman roughly $15 million for structuring the deals in 2007.

Goldman Sachs shares fell more than 12 percent after the SEC announcement, which also caused shares of other financial companies to sink. The Dow Jones industrial average fell more than 120 points in midday trading.

The civil lawsuit filed by the SEC in federal court in Manhattan was the government’s most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession. The SEC’s enforcement chief said the agency is investigating a wide range of practices related to the crisis.

A Goldman Sachs spokesman didn’t immediately return a call seeking comment.

The agency also charged a Goldman vice president, Fabrice Tourre, 31, who it said was principally responsible for devising the deal and marketing the securities.

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Goldman Vice President is only 31 years of age? Insane…

Civil charges only? Why not criminal charges????

Dow is currently 11020 (surprisingly strong). Hold your shorts. We were just chatting with our trading colleague - this pull back will usually go on for a few days, and an attempt to double top will occur later on as a “flushing mechanism”. It flushes bears by tricking them into believing that markets are heading higher, whilst sucking in more bulls who buy on dips. Its a win win. From silver whistle blower Andrew Macguire, we know that these manipulators pay attention to technicals (ie playing the market based on technicals to screw the most  number of technical traders).

We shorted more Amazon in our personal portfolio - PE of >70 is ridiculous (forward PE >30).